UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from
_____________ to _______________.
Commission File Number 0-23880
Monroc, Inc.
Delaware 87-0436697
------------------------ ----------------
(State of incorporation) (I.R.S. Employer
Identification Number)
P.O. Box 537, 1730 Beck Street, Salt Lake City, Utah 84110
- -------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number 801-359-3701
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirement for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
--------------------- ----------------------------------
Common Stock, $0.01 par value 4,467,000 shares
<PAGE>
PART I. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
MONROC, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1997 1996
---------------- --------------
CURRENT ASSETS: (UNAUDITED)
Cash and cash equivalents $361,121 $1,189,631
Accounts receivable, net of allowance
for discounts and doubtful accounts
of $277,875 at March 31, 1997 and
$301,624 at December 31, 1996 12,072,429 13,201,601
Costs and estimated earnings in excess
of billings on uncompleted contracts 332,991 181,634
Inventories 3,849,192 3,977,274
Prepaid expenses 758,573 1,305,491
---------------- --------------
Total current assets 17,374,306 19,855,631
PROPERTY, PLANT AND EQUIPMENT, AT COST 27,254,277 27,310,062
Less accumulated depreciation and
amortization 11,531,495 11,802,432
---------------- --------------
15,722,782 15,507,630
AGGREGATE DEPOSITS 2,477,154 2,477,154
Less accumulated depletion 352,460 337,595
---------------- --------------
2,124,694 2,139,559
LAND 2,377,554 2,352,155
OTHER ASSETS, at cost, less accumulated
amortization of $309,746 at March 31, 1997
and $363,660 at December 31, 1996 765,456 783,277
---------------- --------------
TOTAL ASSETS $38,364,792 $40,638,252
================ ==============
(CONTINUED)
The accompanying notes are an integral part of these statements
-1-
<PAGE>
MONROC, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1997 1996
---------------- --------------
(UNAUDITED)
CURRENT LIABILITIES:
Notes payable $4,118,077 $5,354,688
Current maturities of long-term obligations 1,273,582 1,131,289
Trade accounts payable 4,264,230 6,328,925
Accrued liabilities 1,817,099 1,549,652
Billings in excess of costs and estimated
earnings on uncompleted contracts 832,174 690,254
---------------- --------------
Total current liabilities 12,305,162 15,054,808
LONG-TERM OBLIGATIONS, less current maturities 5,459,716 5,161,743
DEFERRED COMPENSATION 750,201 779,263
DEFERRED INCOME TAXES 971,855 971,855
COMMITMENTS AND CONTINGENCIES 0 0
STOCKHOLDERS' EQUITY:
Preferred stoc
authorized; none issued 0 0
Common stock, $0.01 par value; 20,000,000
shares authorized; issued and outstanding
4,467,000 shares 44,670 44,670
Capital in excess of par value 24,481,864 24,481,864
Accumulated deficit (3,324,630) (3,331,905)
---------------- --------------
21,201,904 21,194,629
Less unpaid principal of Employee Stock
Ownership Plan note receivable (2,324,046) (2,524,046)
---------------- --------------
TOTAL STOCKHOLDERS' EQUITY 18,877,858 18,670,583
---------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,364,792 $40,638,252
================ ==============
The accompanying notes are an integral part of these statements.
-2-
MONROC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1997 1996
---------------- --------------
Sales $14,913,135 $9,204,260
Costs and expenses
Cost of sales 12,867,731 8,481,553
General and administrative 1,611,033 1,439,138
Contr 200,000 200,000
---------------- --------------
14,678,764 10,120,691
---------------- --------------
Operating profit (loss) 234,371 (916,431)
Other income (expense)
Gain on sale of property, plant, equipment
and land 3,825 168
Interest income 8,377 44,604
Interest expense (239,245) (169,029)
---------------- --------------
(227,043) (124,257)
---------------- --------------
Income ( Loss) before income taxes 7,328 (1,040,688)
Income taxes 0 0
---------------- --------------
NET INCOME (LOSS) $7,328 $(1,040,688)
================ ==============
Income (loss) per common share $0.00 $(0.23)
================ ==============
Weighted average common shares outstanding 4,467,000 4,467,000
The accompanying notes are an integral part of these statements
-3-
<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
---------------- --------------
Cash flows from operating activities:
Net income (loss) $7,328 ($1,040,688)
Adjustments to reconcile net income (loss) to
net cash generated (used) in operating
activities
Depreciation and amortization of property,
plant & equipment 569,130 599,782
Provision for contribution to ESOP and
repayment of ESOP note receivable 200,000 200,000
Amortization of other assets 17,821 20,208
Provision for discounts and doubtful
accounts (966) (1,675)
Depletion of aggregate deposits 14,865 10,388
Loss on sale of property, plant,
equipment and land 259,230 168
Changes in assets and liabilities:
Accounts receivable 1,130,138 1,059,111
Costs and estimated earnings in excess
of billings on uncompleted contracts (151,357) (396,081)
Inventories 128,082 (474,974)
Prepaid expenses 546,918 (243,042)
Land (25,399) (4,471)
Trade accounts payable (2,064,695) (1,070,898)
Accrued liabilities 267,447 347,833
Billings in excess of costs and estimated
earnings on uncompleted contracts 141,920 (118,254)
Deferred compensation (29,062) 23,549
---------------- --------------
Net cash generated (used) in
operating activities 1,011,400 (1,089,044)
Cash flows from investing activities:
Additions to property, plant and equipment (1,043,512) (187,732)
Proceeds from sale of property, plant,
equipment, and land 0 126,500
---------------- --------------
Net cash used in investing activities (1,043,512) (61,232)
(CONTINUED)
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
MONROC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Three Months Ended
March 31,
1997 1996
---------------- --------------
Cash flows from financing activities:
Net decrease in notes payable (1,236,611) (65,422)
Principal payments on long-term obligations (125,078) (2,062,997)
Issuance of long-term obligations 565,291 229,000
---------------- --------------
Net cash used in financing activities (796,398) (1,899,419)
---------------- --------------
Net decrease in cash and cash
equivalents (828,510) (3,049,695)
Cash and cash equivalents at beginning of period 1,189,631 6,506,751
---------------- --------------
Cash and cash equivalents at end of period $361,121 $3,457,056
================ ==============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $203,325 $236,134
Income taxes 960 8,410
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
MONROC, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Monroc,
Inc. (the "Company") have been prepared in accordance with generally accepted
accounting principles. In the opinion of management, all normally recurring
adjustments necessary for a fair presentation of the financial information
have been reflected therein. Because of the seasonality and cyclicality of
the Company's businesses, the operating results for the three months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. The revenues and net earnings
for any interim period are not necessarily indicative of results that may be
expected for the entire year.
These statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
Note 2. Environmental Matters
The Company is currently the owner of property located in Murray, Utah
which contains mining slag previously deposited by the former owner. The slag
contains certain heavy metals including lead and arsenic which may have
leached from the slag into the environment. This and adjoining properties
have been proposed by the Environmental Protection Agency (EPA) for listing on
the National Priorities List for cleanup of the slag and potential groundwater
contamination. Although the Company did not generate the slag material, under
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), the current owner of a property may be liable for cleanup costs.
In such case, the Company would have a claim against the former owner for its
respective share of these costs. The Company has not been designated a
Potentially Responsible Party by the EPA with respect to cleanup of any waste
at this site.
The Company has been participating in a study group with the EPA, the
former owner, Murray City and the other current landowners to develop a plan
that would result in the remediation of the problems described above. An
agreement in principle has been reached among all parties, and upon execution
of the agreement in May, 1997, the EPA will begin the process of preparing a
consent agreement in 1997. Cleanup will take one to two years to accomplish
and will involve a combination of offsite disposal, depositing of contaminated
soils in a proposed roadway, redevelopment of the area under certain zoning
restrictions and on site treatment. The agreement in principle requires the
Company to contribute a certain amount of its property for the roadway as its
share of the clean up costs as well as participate in a local improvement
district for the installation of curb, gutter and sidewalks along the proposed
roadway. Until approval of a final consent agreement, it is still uncertain
as to the full financial impact on the Company, if any.
-6-
<PAGE>
Prior to learning of the potential presence of lead in the slag from
this site, the Company sold some of the slag for use in road base and railroad
fill. The Company may be liable for cleanup costs if it is determined that
the lead from this slag poses an environmental hazard. The Company has not
received any notice of government or private action on this matter. The
potential cost to the Company, if any, is not ascertainable at the present
time. The Company's management believes that there are economically
reasonable methods of containing the slag should this become necessary.
Note 3. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share". This standard establishes standards for
computing and presenting earnings per share (EPS). SFAS No. 128 simplifies
the approach for computing both basic and diluted EPS previously found in
Accounting Principles Board Opinion (APB) Opinion No. 15.
Under the new statement, basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997 including interim periods with earlier
application not permitted. Implementation will not have a material effect of
the Company's financial statements.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited Consolidated Financial Statements and related Notes included
elsewhere in this report. Also, the discussion should be read in conjunction
with the audited consolidated Financial Statements and related Notes contained
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996.
Results of Operations - Three Months Ended March 31
Sales increased 62% from $9,204,260 for the three month period ended
March 31, 1996 ("1996 period") to $14,913,135 for the three months ended March
31, 1997 ("1997 period"). Sales for the Prestress Division were 102% higher
in the 1997 period compared to the 1996 period because of higher volume
related to production on the $21 million Snake River Correctional Facility
contract in Ontario, Oregon. Ready mix concrete sales were up 21% due to
increased volume in most markets due to mild winter conditions and good
construction activity. Sand and gravel sales were also 150% higher in the
1997 period due to the operation of the Point of the Mountain pit which
commenced in the third quarter of the 1996 as well as production of materials
for modifications to Interstate 15
("I-15") north of the Company's Beck Street pit.
The Company is engaged in negotiations to supply certain materials,
including aggregates, ready mix concrete and prestress concrete products, to
Wasatch Constructors for use in the I-15 reconstruction project in Salt Lake
County. The Utah Department of Transportation previously awarded the I-15
reconstruction contract to Wasatch Constructors. The Company has entered into
a preliminary Memorandum of Understanding with Wasatch Constructors to supply
aggregates and other materials for the project, but the parties have not
reached a definitive agreement. Accordingly, it is not possible to assess
what impact the I-15 project may have on the Company's future business and
financial performance.
General and administrative costs were $1,611,033 in the 1997 period
compared to $1,439,138 in the 1996 period. Most of this increase was due to
management changes made to improve the operating capability of the Company and
extra staff to meet the demands of the Snake River Correctional Facility
contract.
For the three month period, operating income increased $1,150,802 from
an operating loss of $916,431 in the 1996 period to an operating profit of
$234,371 in the 1997 period. Most of the improvement in the 1997 period is
due to increased volume as described above. In addition, the Company
experienced favorable operating efficiencies from changes made under its new
management and from the milder winter weather.
Interest expense increased to $239,245 in the 1997 period compared to
$169,029 in the 1996 period due to increased borrowings from the CIT Group
under the Company's revolving line of credit arrangement. The funds from such
borrowings were used primarily to finance higher working capital requirements.
(See "Liquidity and Capital Resources" below).
-8-
<PAGE>
Net earnings of $7,328 or less than 1 cent per share was incurred in the
1997 period compared to a net loss of $1,040,688 or 23 cents a share in the
comparable 1996 period. The increased income resulted from higher sales,
improved efficiency and milder weather as discussed above.
Liquidity and Capital Resources
The Company has the use of a credit facility provided by the CIT Group
that includes a line of credit for working capital and term loans. The
Company's liabilities to the CIT Group are secured by liens on substantially
all of the Company's real and personal property. As of March 31, 1997, total
borrowings under the CIT loan agreement totaled $6,118, 077 compared to
$4,939,784 at December 31, 1996. Total availability under the line of credit
was $8,881,923 as of March 31, 1997.
As of March 31, 1997, the Company had positive working capital of
$5,069,144 compared to a positive working capital balance of $4,800,823 at
December 31, 1996. Cash generated from operations was $1,011,400 for the 1997
period versus cash used of $1,089,044 in the 1996 period. Most of the
improvement in operating cash flow in the 1997 period was the result of the
increased earnings and a $546,918 reduction in prepaid expenses as the Snake
River Correctional Facility contract approaches completion. Cash used in
investing activities increased to $1,043,512 in the 1997 period from $61,232
in the 1996 period. Most of the equipment acquired in the 1996 period was
done with off balance sheet operating leases. Overall, the Company expects
investment in equipment to be. Also, cash used for financing activities was
$796,398 for the 1997 period compared to cash used in financing activities of
$1,899,419 in the 1996 period. In the 1997 period, the Company is doing more
financing with capital leases and loans versus operating leases and in the
1996 period, the Company paid down the term loans with CIT $2,000,000 from
proceeds of the private placement of stock.
Seasonality
The Company services the construction industry principally in areas
where construction activity is restricted during the winter. As a result, the
Company experiences reduced revenues from December through March and realizes
the substantial part of its revenues during the other months of the year. The
Company generally incurs losses during the winter months and must have
sufficient working capital to fund operations at a reduced level.
Financial performance of the Company in any one quarter of the year
should not be considered a reliable indicator of the anticipated current year
results. The seasonality and variability of weather conditions as well as the
cyclicality of demand in response to factors such as interest rate changes can
cause significant fluctuations in financial results from quarter to quarter
and from year to year.
-9-
<PAGE>
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Calculation of Earnings (Loss) Per Share
Exhibit 27 - Financial Data Schedule
(b) The Company filed a Current Report on Form 8-K, dated April 9,
1997 to report the change of the Company's auditors from Grant
Thornton, LLP to Deloitte & Touch, LLP.
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Monroc, Inc.
----------------------
Registrant
Date: May 14, 1997 /s/ L. William Rands
------------------- ----------------------
L. William Rands
Vice President and Chief
Financial and Accounting
Officer
<PAGE>
INDEX OF EXHIBITS
Exhibit 11 - Calculation of Earnings (Loss) Per Share
Exhibit 27 - Financial Data Schedule
Exhibit 11
Calculation of Earnings (Loss) Per Share
(in thousands except per share data)
Three Months Ended
March 31,
1997 1996
------ ------
Weighted average common
and common equivalent
shares outstanding 4,467 4,467
Diluted weighted average common
and common equivalent
shares outstanding 4,763 4,467
Net Earnings (Loss) $ 7 $(1,041)
Primary Earnings (Loss) Per
Common Share $0.00 $ (0.23)
Diluted Earnings (Loss) Per
Common Share $ 0.00 $ (0.23)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1997 FINANCIAL STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 361,121
<SECURITIES> 0
<RECEIVABLES> 12,350,304
<ALLOWANCES> 277,875
<INVENTORY> 3,849,1926
<CURRENT-ASSETS> 17,374,306
<PP&E> 27,254,277
<DEPRECIATION> 11,531,495
<TOTAL-ASSETS> 38,364,792
<CURRENT-LIABILITIES> 12,305,162
<BONDS> 5,459,716
0
0
<COMMON> 44,670
<OTHER-SE> 18,833,188
<TOTAL-LIABILITY-AND-EQUITY> 38,364,792
<SALES> 14,913,135
<TOTAL-REVENUES> 14,913,135
<CGS> 12,867,731
<TOTAL-COSTS> 14,678,764
<OTHER-EXPENSES> 3,825
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 230,868
<INCOME-PRETAX> 7,328
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,328
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,328
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
